The Hindu Business Line : Morgan Stanley plans multi-cap open-ended fund

To be benchmarked against the BSE 200, the fund will manage its assets actively, with the fund manager embracing a combination of a top-down approach and a bottom-up stock selection.

Stocks selected may also include those representing sectors that are considered out-of-favour. The fund will seek both value and growth, and will not be restricted in terms of market capitalisations, the offer document filed with SEBI said.

Mr Anthony Heredia, Executive Director, noted that the proposed fund, when it gets launched, will come a long time after Morgan Stanley rolled out its maiden product – the 15-year close-ended Morgan Stanley Growth Fund (MSGF). “We have been planning this for a while, which has necessitated additions to our infrastructure. For 13 years, we have managed MSGF and are now extending the capability that has been developed.”

The fund comes with some of the usual ‘hygiene factors’ – the normal asset allocation strategy will ensure that at least 65 per cent of the assets are invested in equity and equity-related instruments. This may be scaled up to 100 per cent, if warranted. A maximum 35 per cent may be allocated to debt and money market instruments.

There will be an entry load of 2.25 per cent, while a one per cent exit load will be levied for purchases below Rs 5 crores, if a unit holder pulls out within six months from the date of allotment. This will be reduced to 0.5 per cent if the exit takes place between six months and one year from the relevant date. For purchases of Rs 5 crore and above, the exit load will be 0.5 per cent if an investor moves out before six months from date of allotment.

The fund house also plans Morgan Stanley Liquid Fund that would invest all its assets in money market and debt instruments.

Mr Heredia answered a few questions raised by Business Line:

On the difference between MSGF and the Morgan Stanley A.C.E:

The former is mostly a large-cap oriented fund, while the proposed fund will be more multi-cap in nature. The positioning, therefore, will be somewhat different. (Incidentally, MSGF, launched in early 1994, has large exposure to ABB, Bharti Airtel, BHEL, HDFC Bank and Infosys. At the close of August, ABB was the top holding, accounting for 7.34 per cent of the assets. The fund’s corpus stood at Rs 3,360 crores. As on September 4, its NAV was Rs 56.81).

On the possibility of conversion of MSGF into an open-end product:

No decision has been taken on this matter till date. The 15-year tenure will end in early 2009. It will signal the culmination of an interesting run, which has so far seen quite a few ups and downs in the market.

On the possibility of an open-ended MSGF running parallel with the newly-planned fund:

Fund houses in India have come to managing multiple products, including those that are positioned differently, sometimes even unique. There is scope for asset management companies to do this efficiently.

Profitable private sector AMC

Morgan Stanley Mutual Fund, among the first private sector players to set up shop in the country, mopped up a record Rs 981 crore during the initial offer period of its close-ended fund. Unlike other private sector players, the fund house didn’t roll out any other scheme in the domestic markets, and till date continued to manage just one close-ended product – the Morgan Stanley Growth Fund.

Despite this, the AMC could be among the more profitable private sector investment managers in India. Appreciation on the fund’s NAV has contributed to a steady expansion in Morgan Stanley Growth Fund’s asset base over the years. As a result, the investment management fee earned by the fund house for managing this one scheme alone, has more than doubled from Rs 13.5 crore to Rs 28.2 crore between 2004-05 and 2006-07. – BL Research Bureau

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